Three Years Later, Oracle Execs Call Sun Acquisition A Good Deal

Oracle is close to resuming growth in its hardware business, according to Oracle executives who, three years after spending $7.4 billion to buy Sun Microsystems, say the acquisition has more than paid for itself.

"The cash flow has far exceeded the value" of what Oracle paid for Sun, Oracle president Mark Hurd said in response to a question during a conference call with journalists.

Hurd also said the technologies that came with the acquisition, including Java development tools and server hardware, have helped the company develop new products. The most obvious example is Sun's server technology, which forms the foundation of the company's "Engineered Systems" products, including the Exadata and Exalogics servers and the SPARC SuperCluster servers.

Oracle's hardware sales have been steadily declining since Oracle bought Sun three years ago this week. In the second quarter ended Nov. 30, Oracle's hardware systems sales declined 23 percent year-over-year to $734 million, accounting for 8 percent of the company's total sales.

When revenue from hardware systems support is added to the mix, hardware accounted for a little over $1.3 billion in second-quarter sales -- about 15 percent of total revenue for the quarter.

Oracle executives have maintained that hardware sales are declining as the company discontinues sales of commodity server products, focusing instead on value-added products such as the Engineered Systems that combine hardware with Oracle software. Oracle also discontinued OEM sales of several storage system products from other vendors, focusing instead on the Sun ZFS line of storage products.

"We've been very particular and deliberate to focus on our value-add strategy," Hurd said during the media call Monday. He said Engineered Systems saw 70 percent sequential growth in sales bookings in the second quarter.

When asked when hardware sales would resume growing, Hurd said: "We're right about at that crossroads." That echoed statements by CEO Larry Ellison on the second-quarter earnings call in December when he said the company was "just about finished with the downsizing phase" and about to "start growing our hardware business."